How procurement is key for VLH and the hotels sector
All over the world, the hotel industry is changing and now more than ever before the role of procurement is proving key in adapting to the ever-evolving hospitality landscape. The industry has always been driven by the guest but the modern-day hotel guest has far greater access to information and technology, resulting in a more informed guest which demands more from a hotel operator. For Veranda Leisure and Hospitality (VLH), key to understanding and delivering on this increasing demand lies within its procurement.
“We have a hybrid procurement process, that is, we use a mix of decentralised and centralised procurement processes,” says Stephane Lacoste, Group Procurement Manager, VLH. “With this modus operandi and the input of my great team, we can manage to meet our KPIs and achieve world class standards, ensuring that Veranda Leisure and Hospitality increases its competitive advantage.”
VLH is the mother brand of two hotels' brands: Heritage Resorts and Veranda Resorts. The group is composed of three hotels in the three-star category, two hotels in the four-star category, two hotels in the five-star category, a 19th century Chateau, 50 luxury villas, an 18-hole championship golf course, one beach club famous for its international events, and its own spa and wellness brand Seven Colours Spa.
As Group Procurement Manager, Stephane oversees a small team of 9 people and is responsible for VLH’s yearly average spend of $30 million. But as Stephane notes, procurement has changed dramatically in recent years and his teams’ responsibilities have too. “We manage the group's procurements for every category of items over the group” he says. “We are also part of the Project Management teams and we work with them for all procurement-related actions, decisions and strategies during the renovation of current assets and/or acquisition of new hotels.”
This shift in responsibility within VLH speaks to an industry wide shift in procurement, with more and more companies looking to implement a robust strategic procurement function. But what is meant by strategic procurement? “Moving away from tactical procurement to a strategic model was one of the very first tasks I had here at VLH,” says Stephane. “For me, strategic procurement is defined by information; you don’t know what you don’t know so we must be guided by data and information coming from the supply chain.”
VLH, like many organisations before it, had been utilising a ‘tailor-made’ Enterprise Resource Planning (ERP) system and it required a keen understanding and knowledge of how to use it in order to extract the necessary information. Stephane looked to review the company’s whole supply chain and procurement processes, its supplier and item rationalisations and its spending in order to better understand how procurement could better fit into and enable greater value to the VLH’s business model. He found that the existing ERP system proved incredibly inhibiting.
“To be able to do this, the ERP should be up to standards,” he says. “In supply chain, you need a world class ERP system. The better you have and the better your data is stored, the better you will maximise your efficiency in gathering information, the better you will analyse the data and the better you will implement cost improvement/reduction strategies to have the company beneficiate from all of it.”
“If the ERP doesn't deliver strategic information, procurement can’t develop any strategy.”
One such strategy that Stephane and his procurement team have been working on is the implementation of a more sustainably focused procurement function, which echoes a VLH groupwide approach to sustainability best practice. “We are constantly encouraging and helping our business units to buy more responsibly and in a better way for the planet,” says Stephane.
To this end, VLH has removed all plastic straws and polystyrene boxes where used and replaced them with eco-friendly alternatives wherever possible. The group has also replaced more than 200,000 plastic bottles from its operations through the implementation of bottling plants at all of its hotels.
“Sustainability is at the heart of everything we do and it’s rooted within our day-to-day thinking and actions in order to enable the group to be greener throughout every single step of the procurement process,” adds Stephane.
Through the implementation of a Business Intelligence system, as well as the company’s approach to sustainable best practice, VLH continues to act on all steps of the procurement process with the necessary controls and measures in place to increase overall efficiency and effectiveness. Key to any procurement function is its supplier network and VLH has adopted an Early Supplier Involvement (ESI) concept designed to ensure the highest standards are met and continue to be met for all its procurement activities.
“In procurement, each journey is a success only when you have a great team working with you and have great external stakeholders helping you to improve your supply chain” says Stephane. “By applying our ESI concept, we use the knowledge and expertise of our partners to improve and maintain the quality of our goods and services in our supply chain.”
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In order to implement the ESI concept, Stephane understands that he and his team must continuously strive to create strong relationships with these external stakeholders, suppliers and partners. The goal of this, he feels, is to create relationships that are built on trust, mutual respect and honesty. With a supplier database of more than 1500 suppliers and vendors, how does Stephane foster and develop key relationships?
“Face to face communication wherever possible,” he says. “In all relationships trust and honesty should be the more important factors. Win/lose relationships in supply chain will never succeed and for the relationship to work it must be reciprocal.”
“Veranda Leisure and Hospitality is very lucky to have such great suppliers to be part of its supply chain. The process of involving our partners in our decisions is one of our success factors in our relationships.”
A key factor to developing these relationships is transparency and data capture through e-procurement. As the procurement sector becomes more agile and embraces technology further, Stephane can assess its processes and share this information with VLH’s stakeholders. This he feels makes sense in order to foster relationships but also improve and enable growth as a business.
“E-procurement allows greater speed in the way we can do business and the easiness in which we can obtain information and make decisions based on that information,” says Stephane. “Combine that with VLH’s international standard policies regarding good governance and how we rely on internal and external auditors to challenge our processes in order to improve what we do and I’d argue transparency is absolutely crucial to the VLH of today and the one of tomorrow.”
Whatever the future holds for VLH and the wider hospitality sector, procurement will continue to play a key role in enabling growth. With a number of hotel acquisitions already in the pipeline, VLH’s strategy over the coming years will be defined by an approach to continuous improvement, analysing and reanalysing its supply chain and procurement as it continues to play an ever-increasing role in growing competitive advantage.